Author Topic: Real Estate Appraisers?  (Read 508 times)

jeromedawg

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Real Estate Appraisers?
« on: March 10, 2021, 03:45:56 PM »
Hey guys,

As I've been going around looking at homes with our realtor, discussing appraisals and what not, I've actually found it quite an interesting subject - namely determining the appraised value of homes in a given area. Curious if any of you are in the business or know anyone and what your thoughts are. I posted another thread about getting into home inspections, which I think would also be interesting. I'm wondering if it's possible to hold licenses/certifications in both and to actively do both appraisals and home inspections (not necessarily for the same properties but generally at the same time). Also, is this something that can be done in a 'team' format in the case of my wife being interested in doing appraisals too?

jeromedawg

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Re: Real Estate Appraisers?
« Reply #1 on: March 10, 2021, 04:02:19 PM »
Seems the major barrier is cost of entry more so in time. At least for CA, it looks like there is a requirement for 160hours of coursework and then well over 1000 hours of training. Cost of courses may be anywhere between $1000-2000. Does this sound about right? If so, that's a pretty huge amount of overheard... maybe I should just stick with the idea of getting into home inspections haha.

Michael in ABQ

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Re: Real Estate Appraisers?
« Reply #2 on: March 14, 2021, 09:59:21 AM »
I was a commercial real estate appraiser for several years. I never appraised any homes but there's a great forum if you want to get more information https://appraisersforum.com

Bottom line up front, residential appraising has fairly high barriers to entry without a commensurate monetary reward. Commercial real estate is a much better option, but it's also not something you can really dabble in and do part time. There's lots of residential appraisers that do it part-time and may also be brokers, home inspectors, semi-retired, etc. 


The market for residential appraisers changed a lot after 2008. There was a lot of shady stuff that went on with appraisers going along to get along in the early to mid 2000s instead of being an unbiased party in the transaction. This wasn't everyone by any means, but it was enough to tar a lot of people with the same brush.

Ultimately the appraiser is there to keep everyone else honest. The buyer, seller, broker, and lender all want the deal to close. They all have a vested (financial) interest except the appraiser. Just like a home inspector they get paid regardless of whether the sale closes and a mortgage loan is made. Unfortunately, there's still pressure to "hit a number" because you might stop getting business from a lender if you constantly tell them the property is not worth what it's under contract for. Now, there are plenty of appraisals done for other situations, but the vast majority are because a home is selling and a lender needs an appraisal to be in the file for regulators. Because of that, a lot of lenders don't really care that much who the appraisers is and what the quality of their work is and have outsourced the appraisal process to Appraisal Management Companies, or AMCs.


AMCs are pretty much hated by most appraisers because they take a healthy cut of the appraisal fee for "managing" the process. I.e. imposing pages and pages of specific guidance, reviewing the report for meaningless minutiae, imposing unrealistic timelines, etc. So now you're getting paid $250 instead of $350 and therefore have to complete 40% more appraisal reports to make the same amount of money - all while dealing with reviewers that are often no more than trained monkeys following a process, not other appraisers who can apply some logic and experience. So the less experienced and more desperate appraisers snap up any work that comes along, while those more experienced appraisers maintain direct relationships with clients where they can get better fees and more respect for their knowledge and experienced.



Become an appraiser is fairly difficult. Someone can become a broker in a matter of weeks by paying maybe $1,000 for some classes that take a week or two to complete. To become a commercial appraiser I had to complete 300 hours of courses (most are 15 or 30 hours long and cost $500-$1,000 each) including travelling out of state for the vast majority of them. I also had to accrue 3,000 hours of experienced in no less than 30 months working directly under a certified commercial appraiser. This translated to about 3 years of indentured servitude. There are several tests to pass and they are fairly difficult.

I haven't looked at the residential requirements lately but they're about half that. So I think it's around 150 hours of classes and 1,500 hours of experience in no less than 18 or 24 months. I was fortunate that my employer would pay for 1-2 courses a year. But I still paid probably $10k out of pocket over those ~3 years between travel, classes they didn't cover, and lost income from not working while I was taking classes.

At the end of the day I went from making $30k as a trainee to about $60k as a certified appraiser. Had I been able to stop focusing on putting out A/A+ quality work and got along with B-/B quality work I could have been like most of my colleagues making $100-150k/year. Residential appraisers Typically making probably $50-75k/year. Some get into 6 figures, but they probably have trainees or assistants helping them out. A lot of residential appraisers are one-man shops (industry is probably 80% men) but there are plenty of people who have a family member involved. The hardest part of getting started is finding a mentor willing to take you on as a trainee. In most cases you could be training your future competition so a lot of appraisers use a pre-existing relationship to lean on to find a mentor.

Costs for a residential appraiser are fairly minimal. Access to the local MLS (could be multiple depending on your area) will run say $500/year. Errors & Omissions (E&O) Insurance will run $1,000+ per year. Software might be another few hundred dollars per year. For commercial real estate appraisers, the cost of accessing good data can be many thousands per year as a lot of commercial real estate doesn't get listed in the local MLS. The overhead is low enough on the residential side at several hundred per month that it can make sense to just do a few appraisals per month.